Hello, everybody. It's Sam from Financial Samurai. And in this episode, I want to talk about getting the best mortgage interest rate possible. Right now, everybody should be trying to refinance. If you haven't refinanced in a year or two, now is the time because the 10-year bond yield is at 1.5% or even less.

All around the world, rates are going down. Some places, like in Denmark, have negative interest rates. So that's been a boon for consumers and borrowers. Now, to get the best mortgage interest rate possible, it's all about relationship pricing. What do I mean by relationship pricing? Well, it's about bringing new assets to a lender so they can give you a better rate than the market.

Usually, the tiers are $250,000, $500,000, and $1 million. So in other words, if you bring $250,000 over in new assets to a new lender, you will get one rate. And then if you bring in $500,000, you get an even lower rate. And $1 million, you'll get an even lower rate.

So you get bigger credits, in other words. So why do banks do that? Well, it's obvious. They're trying to drum up more business from new customers. Really, the perfect customer is one that opens multiple types of accounts with a bank. It's not just checking and savings. It's checking savings, mortgage, personal loans, credit cards, and so forth.

And then hopefully, the relationship is good and nice and sticky, as they like to say. And then you refer other people to the bank. And they become lifelong customers and so forth. So what happened with me was that I've had a 19-year relationship with Citi Bank. I have multiple accounts open.

I've referred multiple, multiple people to the bank. So I thought, our relationship is pretty good. I'm a Citi, quote, "gold" customer. And so one week, they said, hey, why don't you refinance with us? Well, I was looking and seeing what the best rates were. At the time, it was 3% for a 10/1 arm, which I thought was OK.

I was refinancing a 2.5% five-year arm that was coming due in August 2019. And 3%, it's OK, but I wanted that magical 2 handle, right? Something like 2.875%. And so I just let them know, look, that 3% is good, but I'm hoping for 2.875%. And so the loan officer told me, well, just lock in 3% with us this week, and we're going to do some special pricing, promotional pricing next week.

And we're going to be able to get you 2.875%. So given that I had been working with them for a long, long time, I had no reason not to believe them. So I decided to lock 3%, OK, and then wait a week later. And a week later came, and they said, sorry, we can't do 2.875%.

And I was like, what do you mean, sorry? That's what you told me. And of course, he didn't say it in writing, in an email. And he said, look, I talked to my manager, and I just couldn't do it. And so that really, really put a bitter taste in my mouth.

That was like a bait and switch, like come in here, look around, see if you like anything, and we'll take care of you. Don't worry about it. You know those car advertisements where there's a too-good-to-be-true ad where it's like $199 for a very fancy car that should be more like $600 a month or whatever.

And you get there, and you realize, oh, it's already been sold, because in fine print it says, well, there's only one available at this price. But come on in, sucker. So I really felt like a sucker. So not one to reward broken promises, I decided to cancel the mortgage refinance.

And it wasn't just canceling a week or two weeks after I realized I couldn't get 2.875%. I decided to go through the stringent process of getting all the documents they needed, talk to the manager and the loan officer multiple times, because I'm a glutton, glutton for punishment. And I decided to cancel about 7 to 10 days before it was about to close.

I'd been going through this process for already two months. And I got to admit, part of me wanted to go through this process because I'm a glutton for punishment, but also because I wanted to see if I could learn something new in this latest mortgage refinance process. Oh, and they also said, look, there's no cancellation fee.

So I was going for a free ride here, and I'm always looking to learn. So why not? Why not go through the process, cancel? Because I still had a couple months left before my 5-1 arm was to reset in August. Not one to reward broken promises, I decided to hunt elsewhere.

And I found a better deal with Wells Fargo, which offered me 2.875% for a 7-1 arm with no refinance fees, plus a $2,000 credit. So the old mortgage refinance was a 10-1 arm, so slightly longer. And that's good, but I wasn't planning on holding it for more than five to seven years anyway.

But it was at a higher rate, 0.125%, right, at 3%. And I had to pay $1,500 to refinance. So Wells Fargo seemed like a pretty good deal. A little bit lower rate, and I had this credit. That's like a $3,500 savings. So I decided, you know what? I'm going to go with you guys.

And to get that rate, I would have to transfer $750,000 in new assets over to the bank. Thankfully, I did have that amount, because I have this old, slow-moving portfolio full of municipal bonds and some stocks that I plan on never trading and just holding for next 10 to 20 years.

And because I wasn't going to trade it, it didn't really matter whether I held the portfolio at Citibank or with Wells Fargo or whomever. And so this was my opportunity to get a better rate. But before I agreed with Wells Fargo, I gave Citibank one last chance. I said, hey, guys, I've got this great offer with a better rate and better terms.

Can you match it? Because after all, you said you were going to give me 2.875% anyway. Just do the right thing. I talked back and forth and everything, and I was even willing to accept 2.875%, the match rate, and pay their $1,500 in fees instead of getting a $2,000 credit just to keep things simple.

Because you know what? It is a pain in the butt to move assets and to go with a new relationship. You're taking a risk. So I thought surely Citibank would agree, because I had a written offer and everything. I sent over the email, and it was just clear as day.

I had been a great customer since 2001. Multiple accounts open, multiple referrals. Surely they would say, yes, I will honor our verbal promise. However, they still said no. So you know what? You just got to move with your feet and just take your assets elsewhere. I talked to the Wells Fargo guy, and I said, OK, I'm in.

Please don't let me down. And he said two months should be more than enough time to get the refinance squared away so that I'd be paying the lower 2.875% rate come August 1st instead of my new reset rate of 4.5%. And I believed him. And that's where things went wrong again.

I'm now in my third month of refinancing. I can see the end, but it is definitely not two months where 50% beyond what he said would happen. So what happened? Well, life got in the way, I guess. Well, interest rates really started to continue going down after I locked with Wells Fargo.

And so that created a huge rush of mortgage refinancing. Mortgage refinancing is up 50% year over year in July, and it's probably going to be a similar amount in August. So that's created a huge backlog for the underwriters. And I don't know whether they're just giving me excuses or not.

Because when there's more work to be done, I just work harder to get it done and reach that deadline. Because when I make a promise, I do everything possible to fulfill that promise. So once again, what I realize is that there's a lot of bait and switching, or maybe that's too harsh of a phrase.

There's a lot of overpromising and underdelivering to win a new client's business. So I need you guys to realize that the rate they say might not be the rate that you end up with, or the timing they guide won't be the timing that you'll end up with. I would bake on three to four months to successfully refinance a mortgage.

Long gone are the days where you can refinance a mortgage within 45 days. After the financial crisis, things have gotten a lot more stringent. And as rates have come down, down, down, more and more people are wising up to try to take advantage of these lower rates by refinancing their mortgage.

I've calculated that each day past August 1st, my mortgage refinance does not close, is costing me an unanticipated $33.56 in extra interest. Because I'm now paying the new 4.5% rate instead of the new 2.75 or 2.875% rate. So over a 30-day period, that's an extra $1,005 in mortgage interest expense.

I did not calculate when I was trying to figure out between Citibank and Wells Fargo. So this is something you guys really need to put your loan officer's feet to the fire and say, hey, what do you think is the realistic timing of the mortgage refinance? When he says one month, don't believe him or her.

If he says one or two months, I still wouldn't believe him or her. Three to four months is really the realistic option right now because the banks are indeed flooded. And if you refinance sooner than three or four months, then great, you're going to be winning. And if you don't, you've got to make sure you're not paying the rate lock extension.

Make sure the bank is paying that rate lock extension. It's not your fault if they're dragging their feet. And they should realize this, but make sure they don't drag their feet to try to win more business for their bank while also sticking you with a rate lock extension fee.

Then that would be really, really bad, especially if you're two months, two and a half months into it. Can you imagine? This has happened to multiple readers of Financial Samurai over the years because I've been writing about mortgage refinance since 2009. And there are a lot of straggling banks out there.

Their main objective is to corral as many of you guys as possible. And you know what? If you guys take longer than possible, well, they're going to operate at their own pace. So folks, the lesson here is to do the math and run worst case scenarios where your mortgage refinance will take maybe four months to refinance.

And then calculate that extra interest payment that you would have to pay because of this delay. For those with 30-year fixed mortgages, it shouldn't matter as much how long the refinance takes because your mortgage rate isn't resetting. But to save money, you should still refinance and push to have a quicker close.

Paying a 30-year fixed rate mortgage has proven to be a suboptimal choice as interest rates have come down since the late 1980s. And this is a topic, whole nother topic, 30-year fixed or ARM. But I am an ARM believer because I believe interest rates are going to go down or stay low for the rest of our lifetimes.

If you have an ARM, your ideal scenario is to refinance into another ARM one week before your existing ARM is set to expire. Then you avoid the new higher reset rate, which usually is at max 2% higher than your existing ARM. So hopefully you guys got a lot out of this podcast.

It truly is a frustrating experience for me to refinance. And I fear that it's going to be a little bit frustrating experience for you as well. Getting all those documents and everything is really a painful, painful process. And my refinance has taken so long that I've had to resend multiple documents because they expired.

So I hereby solemnly swear never to refinance a mortgage again after this one is done. I'm either going to pay cash for a new property or just let things ride and not buy something new. Because at my age and my stage in life, I just don't have time for this.

But I hope you guys do, because saving money is always a worthwhile endeavor. Thanks so much, everyone. And if you enjoyed this podcast, I'd love to receive a positive review.